Lubbock businessman's fleeced investors get back little

LUBBOCK — The investors tricked by Benny Lee Judah’s Ponzi scheme got back about $10.3 million — not quite a third of the $35.9 million they lost on his fraudulent debentures — according to the receiver who liquidated Judah’s business and personal assets.

Lubbock attorney Fernando M. Bustos said in his closing report to U.S. District Judge Sam R. Cummings on Dec. 20 that sum is a recovery of nearly 29 percent for the 290 investor-victims who sank a combined $50.1 million into Excel Lease Fund’s debentures between 2004 and 2009.

Cummings approved Bustos’ request to close the receivership Thursday, some 45 months after Judah surrendered his business and personal holdings to federal regulators amid allegations he’d violated securities trading regulations for a second time.

The Securities and Exchange Commission accused Judah of offering unregistered securities without a securities dealer’s license; he signed a consent agreement accepting the penalty without admitting guilt.

In 2001, the SEC ordered him to pay a $50,000 civil penalty for issuing some $32 million in promissory notes between 1987 and 2000 for his equipment leasing business and to give the money back to his investors.

In Amarillo, Judah either owned outright or had the majority share in the parent corporations of restaurants Harrigan’s, Las Brisas and Zookini’s. He also owned a 32.5 percent stake in Retail Ready Foods, a meatpacking operation in Amarillo.

Final stats

Bustos, the court-appointed receiver, reported the total value of the liquidated assets — which included several restaurants, real estate development tracts, farmland and an athletic club — was about $19.3 million.

Acquisition costs on those assets, however, added up to more than $7.2 million, as some of his investments were heavily encumbered.

For example, Judah’s Solaris residential development on Lubbock’s south side sold at auction for about $2.31 million. The sale netted nothing for the receivership, however, after closing costs and a $2.23 million lien on the property were paid.

Similarly, Judah’s Las Brisas Southwest Steakhouse sold for about $1.7 million, but the receiver cleared less than $200,000 because of more than $1.3 million in liens.

Only one large asset in the receivership produced a sizeable gain for the estate. The Falls Athletic and Tennis Club sold at auction for $1.65 million, with a net of nearly $1.4 million after closing costs and fees.

Administrative costs on the receivership totaled almost $1.8 million. In the final report, Bustos told Cummings the 9 percent administrative cost for the receivership is substantially less than the 20 percent cost the SEC anticipates in similar recovery cases.

Missing money

The $19.3 million asset value is substantially less than the $50.1 million investors loaned Judah.

Forensic accountants who worked on the receivership tracked where the investors’ money went and found Judah had lost some $15 million of that money playing the stock market as a day-trader.

His assets included two daytrading accounts with TD Ameritrade. The balance in one was $3,271.80; the other was $319.07.

In a deposition, Judah said he’d started day-trading to recover investors’ money he’d lost elsewhere. He also admitted lending as much as $15 million of investors’ money to himself, to other businesses he controlled and to employees of his companies.

Part of the difference between the loss calculated by the receivers’ accountants and what investors paid in reflects the receiver’s approach to dealing with the returns Judah did pay investors — a situation that, in the months between the SEC action and Judah’s arraignment on federal fraud and money laundering charges, had some of his victims wondering why he was in trouble.

According to court documents, Bustos calculated each victim’s losses by subtracting any dividend payments Judah had sent them. He also disallowed “excess” loss claims from investors who’d allowed their dividends to roll over in their accounts, rather than taking cash payments at the time.

What’s left

Judah pleaded guilty in November 2009 to money laundering and selling unregistered securities and is serving a 25-year sentence in federal prison. Cummings, who also accepted Judah’s guilty plea in the criminal case, also ordered him to pay $59.1 million in restitution.

The $10.3 million recovery leaves nearly $49 million on the books in restitution, and under the sentencing order, Judah is to pay $250 per month toward reducing that debt starting 60 days after his release from prison.

According to the federal Bureau of Prisons database, Judah’s expected release date is August 2031. While that’s short of the full 25 years, in estimating release dates, federal prison officials routinely include “good time” — a formula that credits inmates who exhibit good behavior with 54 days for each year served.

Bustos’ report also notes investor-victims may still see some very small payouts in the future.

It states Judah has been receiving commission payments from an insurance company, and that Judah companies have occasionally received money recovered from the Lubbock County Criminal District Attorney’s hot check program.

With the receivership closed, those funds will be sent instead to the federal court clerk’s office for redistribution.